298 P.3d 1045 (Hawai‘i 2013), SCWC-28762, District Council 50, of Intern. Union of Painters and Allied Trades v. Lopez

Docket Nº:SCWC-28762.
Citation:298 P.3d 1045, 129 Hawai'i 281
Opinion Judge:NAKAYAMA, Acting C.J.
Party Name:DISTRICT COUNCIL 50, OF the INTERNATIONAL UNION OF PAINTERS AND ALLIED TRADES and Aloha Glass Sales & Service, Inc., Petitioners/Plaintiffs-Appellants, v. Keali‘i S. LOPEZ, in her capacity as Director, Department of Commerce and Consumer Affairs, Respondent/Defendant-Appellee.
Attorney:Michael A. Lilly and Valerie M. Kato, Honolulu, for petitioners. Lei S. Fukumura, Deborah Day Emerson and Rodney J. Tam, Honolulu, for respondent.
Judge Panel:NAKAYAMA, Acting C.J., McKENNA, J., and Circuit Judge SAKAMOTO in Place of POLLACK, J., Recused, with Circuit Judge KIM in Place of RECKTENWALD, C.J., Recused, Concurring and Dissenting, with whom Circuit Judge TO‘OTO‘O, in Place of ACOBA, J., Recused, Joins.
Case Date:April 17, 2013
Court:Superior Court of Hawai'i
 
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Page 1045

298 P.3d 1045 (Hawai‘i 2013)

129 Hawai'i 281

DISTRICT COUNCIL 50, OF the INTERNATIONAL UNION OF PAINTERS AND ALLIED TRADES and Aloha Glass Sales & Service, Inc., Petitioners/Plaintiffs-Appellants,

v.

Keali‘i S. LOPEZ, in her capacity as Director, Department of Commerce and Consumer Affairs, Respondent/Defendant-Appellee.

No. SCWC-28762.

Supreme Court of Hawai‘i.

April 17, 2013

Page 1046

Michael A. Lilly and Valerie M. Kato, Honolulu, for petitioners.

Lei S. Fukumura, Deborah Day Emerson and Rodney J. Tam, Honolulu, for respondent.

NAKAYAMA, Acting C.J., McKENNA, J., and Circuit Judge SAKAMOTO in Place of POLLACK, J., Recused, with Circuit Judge KIM in Place of RECKTENWALD, C.J., Recused, Concurring and Dissenting, with whom Circuit Judge TO‘OTO‘O, in Place of ACOBA, J., Recused, Joins.

Page 1047

OPINION

NAKAYAMA, Acting C.J.

In 2005, the State of Hawai‘i contracted with general contractor Allied Pacific Builders, Inc. (Allied Pacific) to complete the renovation of Lanakila Elementary School. The project included extensive glazing work, specifically the fabrication and installation of 476 jalousie windows. Allied Pacific holds a C-5 specialty license in "[c]abinet, millwork, and carpentry remodeling and repairs," but it does not hold a specialty glazing license.

The Department of Commerce and Consumer Affairs's (DCCA) Contractors License Board (the Board) concluded that Allied Pacific could complete the jalousie window work pursuant to its C-5 license. The Board determined that the jalousie window work qualified as "incidental and supplemental" to the remodeling and repair work authorized under Allied Pacific's C-5 license. We hold that because the Board did not consider the cost and extent of the work when determining if that work qualified as "incidental and supplemental" to the project, the Board's interpretation of the "incidental and supplemental" exception is contrary to law and contrary to the primary purpose of the legislation regarding contractor licensing.

I. BACKGROUND

A. Factual Background

This case arises from the State of Hawaii's renovation project known as "Lanakila Elementary School Renovate and Paint Various Buildings DAGS Job No. 52-16-5581" (the Project). On January 31, 2005,1 the Department of Education (DOE), State of Hawai‘i, and the Department of Accounting and General Services (DAGS), Public Works Division, issued a Notice to Bidders (Notice) describing the work involved in the Project. The Notice stated:

The work generally consists of replacement of windows, floor covering, tackboards, whiteboards, electrical light fixtures, switches, receptacles and cover plates, doors and door frames, finish hardware, termite damaged wood, gypsum wallboard partition, sinks and cabinets, re-keying of locks, interior and exterior painting, cast-in-place concrete, concrete repairs, concrete masonry, and some minor repair work.

....

To be eligible to submit a Bid, the Bidder must possess a valid State of Hawaii Contractor's license classification B.

Included within the Project was the installation of 476 aluminum jalousie windows, containing approximately 10,390 vinyl slats. The Project specifications required that "[f]abrication and installation of jalousie windows shall be done by skilled and experienced mechanics to the best standard of the trade and in accordance with the approved shop drawings." Under one estimate, the window work cost $372,875, representing approximately 20% to 25% of the total project cost.2 This type of window work falls within the C-22 specialty license for glaziers.3 See Hawai‘i Administrative Rules (HAR) § 16-77-28(c) (incorporating Exhibit A into the chapter) (hereinafter HAR § 16-77-28(c), Exhibit A).

The Notice also included detailed instructions explaining how and why DOE and DAGS required bidders to specify subcontractors

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in the bid. The instructions provided, in pertinent part:

1. Bidder shall complete the "Joint Contractors or Subcontractors List". It is the sole responsibility of the Bidder to review the requirements of this project and determine the appropriate specialty Contractor's licenses that are required to complete the project. Failure of the Bidder to provide the correct names, license numbers, specialty class number, classification description and to indicate that the specialty Contractor is required for this project, may cause the bid to be rejected.

2. Bidder agrees the completed listing of Joint Contractors or Subcontractors is required for the project and that the Bidder, together with the listed Joint Contractors and Subcontractors, have all the specialty Contractor's licenses to complete the work.

3. Based on the Hawaii Supreme Court's January 28, 2002 decision in Okada Trucking Co., Ltd. v. Board of Water Supply, et al., 97 Hawai‘i 450 [40 P.3d 73] (2002), the Bidder as a General Contractor (‘A’ or ‘B’ license) is prohibited from undertaking any work solely or as part of a larger project, which would require the Bidder (‘A’ or ‘B’ General Contractor) to act as a specialty (‘C’ license) Contractor in any area in which the Bidder (‘A’ or ‘B’ General Contractor) has no specialty Contractor's license. Although the ‘A’ and ‘B’ Contractor may still bid on and act as the "Prime Contractor" on an ‘A’ or ‘B’ project (See, HRS § [ ]444-7 for the definitions of an "A" and "B" project), respectively, the ‘A’ and ‘B’ Contractor may only perform work in the areas in which they have the appropriate Contractor's license. The Bidder (‘A’ or ‘B’ General Contractor) must have the appropriate ‘C’ specialty Contractor's licenses either obtained on its own, or obtained automatically under HAR § [ ]16-77-32.

On December 20, 2005, DOE and DAGS accepted low bidder Allied Pacific's bid on the Project. Allied Pacific is licensed as a "B" general building contractor 4 and, therefore, holds an automatic C-5 specialty license.5See HAR § 16-77-32(c) (2004). Allied Pacific's bid listed a number of subcontractors holding specialty contractor licenses, but did not list any subcontractor holding a C-22 glazing and tinting license. It is undisputed that Allied Pacific does not possess a C-22 license. District Council 50, 2012 WL 3044105, at *3.

B. Procedural Background

On or about March 24, 2006, District Council 50 of the International Union of Painters and Allied Trades (DC 50) 6 and Aloha Glass Sales & Service, Inc. (Aloha Glass) 7 (collectively, Petitioners) filed a Petition for Declaratory Ruling (Petition) with DCCA's Contractors License Board. The Board referred

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the Petition to the Office of Administrative Hearings for further proceedings on April 26, 2006. The Petition was filed pursuant to Hawaii Revised Statutes (HRS) § 444-4(9) (1995)8 and HAR § 16-201-48 (1990).9 This statute, and the rule implementing it, allows the Board to issue declaratory rulings regarding statutes, rules, and orders governing contractors. See HRS § 444-4(9); HAR § 16-201-48. Petitioners sought a ruling that "[a] general building contractor with a B-license cannot engage in work requiring a C-22 subcontractor license under the general contractor's license." 10

Petitioners' argument was based on their interpretation of HRS §§ 444-9 (1993) and 444-8(c) (1993), and our opinion in Okada Trucking, 97 Hawai‘i 450, 40 P.3d 73 (2002). HRS § 444-9 contains a broad prohibition against unlicensed work:

No person within the purview of this chapter shall act, or assume to act, or advertise, as general engineering contractor, general building contractor, or specialty contractor without a license previously obtained under and in compliance with this chapter and the rules and regulations of the contractors license board.

HRS § 444-8(c) creates a general exception for specialty contractors to complete work for which they are unlicensed if the work is "incidental and supplemental" to licensed work:

This section shall not prohibit a specialty contractor from taking and executing a contract involving the use of two or more crafts or trades, if the performance of the work in the crafts or trades, other than in which the specialty contractor is licensed, is incidental and supplemental to the performance of work in the craft for which the specialty contractor is licensed.

(emphasis added). Petitioners argued that "incidental and supplemental" must be interpreted narrowly so as not to " ‘expand the scope of work in which a general engineering contractor may engage.’ " They interpreted Okada Trucking as "explicitly stat[ing] that neither an ‘A’ nor ‘B’ licensee could engage in ‘incidental and supplemental’ work in trades or crafts in which it is not licensed."

The hearings officer issued his recommendations on October 26, 2006. The hearings officer concluded: "The jalousie window replacement work can be undertaken by a C-22 specialty contractor, and a C-5 specialty contractor provided that the work is incidental and supplemental to the renovation work for which the C-5 contractor is licensed to

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perform." The hearings officer interpreted Okada Trucking as holding only that a general building contractor could not perform work for which it was not licensed. Therefore, work that falls under the "incidental and supplemental" provision is licensed and the performance of this work by a general contractor would not violate Okada Trucking.

In interpreting the terms "incidental and supplemental," the hearings officer relied upon the definition found in HAR § 16-77-34. This rule defines "incidental and supplemental" as " ‘work in other trades directly related to and necessary for the completion of the project undertaken by a licensee pursuant to the scope of the licensee's license.’ " The hearings officer noted that this definition of "incidental and...

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